Types of Leaders

Transactional Versus Transformational Leaders

Transactional leaders are concerned about the status quo, while transformational leaders are more change-oriented.

Learning Objectives

Differentiate between transactional leaders and transformational leaders in a full-rangeĀ approach, particularly from a behavioral perspective

Key Takeaways

Key Points

  • Transactional leadership works within set established goals and organizational boundaries, while a transformational approach challenges the status quo and is more future-oriented.
  • Transactional leadership emphasizes organization, performance evaluation and rewards, and is task- and outcome-oriented.
  • Transformational leadership focuses on motivating and engaging followers with a vision of the future.

Key Terms

  • Buy-in: In management and decision making, the commitment of interested or affected parties (often called stakeholders) to agree to support a decision, often by having been involved in its formulation.

Leadership can be described as transactional or transformational. Transactional leaders focuses on the role of supervision, organization, and group performance. They are concerned about the status quo and day-to-day progress toward goals. Transformational leaders work to enhance the motivation and engagement of followers by directing their behavior toward a shared vision. While transactional leadership operates within existing boundaries of processes, structures, and goals, transformational leadership challenges the current state and is change-oriented.

Transactional Leadership

Transactional leadership promotes compliance with existing organizational goals and performance expectations through supervision and the use of rewards and punishments. Transactional leaders are task- and outcome-oriented. Especially effective under strict time and resource constraints and in highly-specified projects, this approach adheres to the status quo and employs a form of management that pays close attention to how employees perform their tasks.

Transformational Leadership

Transformational leadership focuses on increasing employee motivation and engagement and attempts to link employees’ sense of self with organizational values. This leadership style emphasizes leading by example, so followers can identify with the leader’s vision and values. A transformational approach focuses on individual strengths and weaknesses of employees and on enhancing their capabilities and their commitment to organizational goals, often by seeking their buy-in for decisions.

Comparing Leadership Types

Transactional and transformational leadership exhibit five key differences:

  1. Transactional leadership reacts to problems as they arise, whereas transformational leadership is more likely to address issues before they become problematic.
  2. Transactional leaders work within existing an organizational culture, while transformational leaders emphasize new ideas and thereby “transform” organizational culture.
  3. Transactional leaders reward and punish in traditional ways according to organizational standards; transformational leaders attempt to achieve positive results from employees by keeping them invested in projects, leading to an internal, high-order reward system.
  4. Transactional leaders appeal to the self-interest of employees who seek out rewards for themselves, in contrast to transformational leaders, who appeal to group interests and notions of organizational success.
  5. Transactional leadership is more akin to the common notions of management, whereas transformational leadership adheres more closely to what is colloquially referred to as leadership.

Key Behaviors of Transactional Leaders

Transactional leaders focus on performance, promote success with rewards and punishments, and maintain compliance with organizational norms.

Learning Objectives

Identify the different behaviors attributed to transactional leadersĀ and how they can motivate an organization

Key Takeaways

Key Points

  • Transactional leaders focus on managing and supervising their employees and on group performance. They monitor their employees’ work carefully to assess any deviation from expected standards.
  • Transactional leaders promote success by doling out both rewards and punishments contingent on performance.
  • Transactional leaders work within existing organizational structures and shape their work according to the current organizational culture.

Key Terms

  • Maslow’s Hierarchy of Needs: A psychological theory, proposed by Abraham Maslow in the 1943 paper “A Theory of Human Motivation,” which depicts lower- and higher-level human needs in the form of a pyramid.

Transactional leaders focus on managing and supervising their employees and on facilitating group performance. The role of a transactional leader is primarily passive, in that it sets policy and assessment criteria and then intervenes only in the event of performance problems or needs for exceptions. Transactional leaders seek to maintain compliance within existing goals and expectations and the current organizational culture. They are extrinsic motivators who encourage success through the use of rewards and punishment.


Benchmarking Measures Performance: Results are the paramount concern to a transactional leader. Performance ratings can be used to measure results.

Transactional leaders are expected to do the following:

  • Set goals and provide explicit guidance regarding what they expect from organizational members and how they will be rewarded for their efforts and commitment
  • Provide constructive feedback on performance
  • Focus on increasing the efficiency of established routines and procedures and show concern for following existing rules rather than making changes
  • Establish and standardize practices that will help the organization become efficient and productive
  • Respond to deviations from expected outcomes and identify corrective actions to improve performance

Psychologist Abraham Maslow characterized people’s motivating factors in terms of needs. Maslow’s Hierarchy of Needs describes levels of needs ranging from the most essential, such as physiological (e.g., food and sleep) and safety, to higher levels of esteem and self-actualization. Transactional leadership satisfies lower-level needs but addresses those at a high level only to a limited degree. As such, transactional leaders’ behavior appeals to only a portion of followers’ motivating factors.

Transactional leadership can be very effective in the right settings. Coaches of sports teams are a good example of appropriate transactional leadership. The rules for a sports team allow for little flexibility, and adherence to organizational norms is key; even so, effective coaches can motivate their team members to play and win, even at risk to themselves.

Key Behaviors of Transformational Leaders

Transformational leaders exhibit individualized consideration, intellectual stimulation, inspirational motivation, and idealized influence.

Learning Objectives

Explain the varying approaches and behaviors that define transformational leadership

Key Takeaways

Key Points

  • Transformational leaders show individualized consideration to followers by paying attention to and meeting the needs of followers.
  • Transformational leaders stimulate ideas and creativity from followers by creating a safe environment to challenge the status quo.
  • Transformational leaders have a vision that inspires and motivates followers to achieve important goals.
  • Transformational leaders serve as role models for their followers, allow them to identify with a shared organizational vision, and provide a sense of meaning and achievement.

Key Terms

  • Transformational Leadership: An approach to leading that enhances the motivation, morale, and performance of followers through a variety of mechanisms.

Transformational leaders challenge followers with an attractive vision and tie that vision to a strategy for its achievement. They engage and motivate followers to identify with the organization ‘s goals and values. Transformational leadership comprises four types of behavior:


Leading the team: Transformational leaders inspire their employees to do more.

  • Individualized consideration or compassionate leadership
  • Intellectual stimulation
  • Inspirational motivation
  • Idealized influence or charismatic leadership

Individualized Consideration

Individualized consideration is the degree to which the leader attends to each follower’s needs, acts as a mentor or coach to the follower, and listens to the follower’s concerns. This behavior can include the following actions:

  • Discussing and empathizing with the needs of individual employees
  • Making interpersonal connections with employees
  • Showing genuine compassion
  • Encouraging ongoing professional development and personal growth of employees

Intellectual Stimulation

Transformational leaders encourage followers to be innovative and creative. Intellectual stimulation springs from leaders who establish safe conditions for experimentation and sharing ideas. They tackle old problems in a novel fashion and inspire employees to think about their conventional methods critically and share new ideas. This type of behavior includes:

  • Encouraging employees’ creativity
  • Challenging the status quo
  • Aiming for consistent innovation
  • Empowering employees to disagree with leadership
  • Risk-taking when appropriate to achieve goals

Inspirational Motivation

Leaders with an inspiring vision challenge followers to leave their comfort zones, communicate optimism about future goals, and provide meaning for the task at hand. Purpose and meaning provide the energy that drives a group forward. The visionary aspects of leadership are supported by communication skills that make the vision understandable, precise, powerful, and engaging. Followers are willing to invest more effort in their tasks; they are encouraged and optimistic about the future and believe in their abilities. Behaviors that demonstrate inspirational motivation include:

  • Inspiring employees to improve their outcomes
  • Explaining how the organization will change over time
  • Fostering a strong sense of purpose among employees
  • Linking individual employee and organizational goals
  • Aiding employees to succeed to an even greater extent than they expect

Idealized Influence

Transformational leaders act as role models for their followers. Transformational leaders must embody the values that the followers should be learning and internalizing. The foundation of transformational leadership is the promotion of consistent vision and values. Transformational leaders guide followers by providing them with a sense of meaning and challenge. They foster the spirit of teamwork and commitment in the following ways:

  • Promoting a broad, inclusive vision
  • Leading by example
  • Showing strong commitment to goals
  • Creating trust and confidence in employees
  • Representing organizational goals, culture, and mission

A Blended Approach to Leadership

The full-range leadership theory blends the features of transactional and transformational leadership into one comprehensive approach.

Learning Objectives

Assess the intrinsic value of blending transactional leadership behaviors with transformational leadership behaviors

Key Takeaways

Key Points

  • Transactional and transformational leadership are not mutually exclusive, and leaders often demonstrate traits associated with both approaches.
  • The Multifactor Leadership Questionnaire is used in diagnosing leadership styles and for developing leadership.
  • Leaders use elements of transformational and transactional leadership as the situation calls for them.

Key Terms

  • Transformational Leadership: A theory of leading that enhances the motivation, morale, and performance of followers through a variety of mechanisms.
  • Transactional Leadership: A theory of leading that focuses on the role of supervision, organization, and group performance; leader promotes compliance through rewards and punishments. Also known as managerial leadership.

The full-range theory of leadership seeks to blend the best aspects of transactional and transformational leadership into one comprehensive approach. Transactional leadership focuses on exchanges between leaders and followers. Transformational leadership deals with how leaders help followers go beyond individual interests to pursue a shared vision. These two approaches are neither mutually exclusive, nor do leaders necessarily exhibit only one or the other set of behaviors. Depending on the objectives and the situation, a leader may move from using one approach to the other as needed.

Management researcher Bernard Bass developed the Multifactor Leadership Questionnaire (MLQ), consisting of 36 items that reflect the leadership aspects associated with both approaches. The MLQ also includes several characteristics of a more passive leadership approach known as laissez-faire. Respondents are asked to think about a leader they work with and to rate how frequently the individual exhibits the leadership behaviors. The MLQ is used to help leaders discover how their followers perceive their behaviors, so they can develop their leadership abilities. The questionnaire is most effective with eight to twelve respondents, as this feedback gives leaders a broad set of perspectives from the people who interact with them.